Malcolm Kyle

By Simon Cox

BBC Radio 4′s The Report

Up to £1.5bn of unpaid tax is likely to be written off by HM Revenue and Customs, insiders have told the BBC.

Staff said the vast majority would not be pursued because the cases involved were over two years old and open to legal challenge from taxpayers.

There is a backlog of 7.5 million cases of tax underpayment or overpayment – the latter estimated at £3bn which will be reimbursed – dating back to 2007-8.

An HMRC spokesman said no decision had been made on underpayment cases.

The details come just weeks after it emerged a further six million people had been wrongly taxed in the past two years, with 1.4 million people who underpaid set to receive an unexpected tax bill.

The latest cases to emerge, which are part of a huge backlog of open cases dating back to 2007/8, are not on the HMRC’s new computer system and will have to be dealt with manually.

‘Frustrating’

Front-line staff at HMRC have told The Report on Radio 4 that only those cases that verge on fraud will be pursued.

Cases where money is owed to taxpayers by the Exchequer will still be processed.

One staff member told the BBC: “For each underpayment there are thousands of pounds owed. Underpayments are very frustrating.

“If we had the chance to sort it out three years ago we could have recovered the money. It is now likely to be written off if it’s over two years – we’re not looking at underpayments beyond two years.”

The staff member added: “Our directors are telling people that [those who owe tax] will appeal and fight it and this will generate more work.”

Another staff member who has worked on open cases said that in their experience the underpayment of tax was never pursued.

“These people who have underpaid earn 30, 40, 50k a year and got benefits such as a company car and we’re not told about them until after the tax has been paid.”

The staff member added: “The cases cannot be dealt with by the new computer as they have to be done manually – what did we do with the cases older than two years? We wrote them off.”

The delay in handling these open cases is due to a combination of a historic backlog, which once reached 30 million, the additional work created by problems with the new computer system and a shrinking number of staff.

‘Future decision’

“But while we are reviewing the cases of underpayment, no decision has been made on on these cases.”

He added: “It’s a provisional period, where staff have been asked to review underpayments. If they find someone who has underpaid then that is set aside for a future decision.

“We are going to be looking at at how best to deal with these. We are going to look at the specifics of each case and apply a normal criteria in due course.

“Those who have underpaid, they will be part of the overall decision-making process – no decision yet on what to do with them. But they are being identified.”

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Wave of condemnation forces official to perform U-turn – but no more concessions are made

By Brian Brady and Kate Youde

The Independent

Sunday 12th September 2010

The country’s top tax official was forced into an embarrassing about-face last night, when he finally apologised to the 1.4 million people who must pay more tax. His contrition followed an angry backlash and calls for his dismissal at his earlier refusal to express regret.

Dave Hartnett, the HM Revenue and Customs permanent secretary, last night said he was “deeply sorry that people are facing an unexpected bill”.

His statement came swiftly after a government minister waded into the row, claiming Mr Hartnett should be sacked if he refused to apologise. In a remarkable outburst, the Treasury front-bencher Lord Oakeshott said Mr Hartnett’s response to the tax crisis made the BP chief, Tony Hayward, “look like a model of disaster management”. The Liberal Democrat peer accused Mr Hartnett of being “in a world of his own; I wonder what planet he is on”.

“This is the latest in a series of management failures in the HMRC going back many years. If Mr Hartnett cannot see why he should apologise for this one, then he really should be reconsidering his own position,” Lord Oakeshott said.

Mr Hartnett also sparked an angry reaction from taxpayers over his “arrogant” claims there was no need to apologise. Speaking on BBC Radio 4′s Money Box programme, he denied the HMRC had made mistakes and defended its decision to ask people who owe more than £2,000 to pay the money back quickly by arguing these taxpayers were likely to be higher earners.

“I’m not sure I see a need to apologise,” Mr Harnett told the programme when asked if he would say sorry to taxpayers facing unexpected bills. “I’ve read the papers, listened to the media and heard stories of HMRC blunder and IT failure – neither of those are true. Every country that I know of that has deduction of tax from wages and salaries has to do a reconciliation at the end of each year and we’re doing one.”

The public outcry that followed his comments resulted in a swift change of heart. “Everyone in HMRC is working hard to make this as painless as possible,” Mr Hartnett added in a statement last night. “I apologise if my remarks came across as insensitive. I am working flat out with my colleagues to ensure everyone’s tax is correct and the new computer system will help us do this. It was this new system that revealed the extent and size of reconciliations required – and will help us be more accurate in future – but we do not underestimate the distress caused to taxpayers and, once again, I apologise.”

Taxpayers were quick to voice their fury at his words. Philip Cooke, of Birmingham, in a BBC website posting, said: “I have to say that Mr Hartnett’s comment that no apology is required seems somewhat arrogant to me. It cannot be disputed that ‘all is not well in the state of the HMRC’.”

Another comment, from John in Bristol, added: “Mr Hartnett’s arrogance beggars belief. I remember watching him in an interview about tax office mistakes, and his attitude was exactly the same then: ‘we are a big organisation and we make mistakes – so what’.”

It is thought errors in pay-as-you-earn (PAYE) tax codes mean 2.3 million people underpaid income tax during the past two tax years. However, around 900,000 will escape having to repay any money after the Government raised the write-off threshold. A total of around £2bn is owed collectively.

Mr Hartnett told the BBC. “Once or twice in the past the numbers have been very large – sometimes they’re less – it depends on how the system has been operated and what issues there have been.

“We didn’t get it wrong. This needs to be reconciled.”

People who owe less than £2,000 will be able to pay in monthly instalments taken from their salary over one to three years, but those facing larger amounts will have no more than three months to pay the money.

Mr Hartnett said these people faced a shorter timetable “because I think owing the most may actually mean they’re earning the most”.

HMRC has sent out about 45,000 letters as a pilot, which will allow for changes to be made before the rest are sent before Christmas to the remaining six million people who either owe tax or are due a refund.

HMRC checks every year that the tax and national insurance an employer deducts matches information in its records. An incorrect amount of tax may have been paid if people failed to tell HMRC about changes to their circumstances.

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Published Date: 04 September 2010

By Graham Scott

Writing a will might seem a daunting task, but your loved ones will thank you for planning ahead, reports The Scotsman, as they publish advice on how to set out your wishes for after you’ve passed.

According to a recent Panorama programme, two-thirds of the population do not have a will. Writing a will is not as daunting as it may appear, but it’s important to get things moving by preparing a pre-will checklist before you have your will drafted.

Graham Scott suggests you carefully consider the following ten points.

1 DON’T SCRIMP - Think very carefully before being tempted by cheap “one size fits all” facilities, such as the DIY will packs available from some newsagents, they more often than not do not cover everything you need.

2 KNOW WHAT YOU ARE WORTH - Write down a full list of all your heritable assets (i.e. property) and moveable assets (i.e. cash, shares, consumer and household goods). This should give you a good idea of what your estate is worth in total and should help in deciding how to “divide the cake”.

3 GIFT ACCOUNT – In a similar vein to the above, set out details of gifts of cash or goods that have been made to children, other close relatives or friends within the past seven years. Any gifts above the value of £3,000 in any one year and made within seven years of a person’s death will, under current HM Revenue & Customs (HMRC) rules be treated as part of the deceased’s estate and therefore potentially liable for inheritance tax.

4 ANTICIPATE IHT – Should it be obvious that your estate will become liable for inheritance tax (IHT) it may be worth considering taking out a life insurance policy that will produce funds that may go some way to meeting any IHT liability on death. It is also possible to insure against gifts made within seven years of death from becoming part of a deceased person’s estate. Remember that when an estate does become liable for IHT, the executors will need to take out a loan or the beneficiaries will have to fund the tax payments initially from their own pockets because IHT is payable to HMRC before the assets can be realised by the executors.

5 TOGETHERNESS – Although a husband and wife will normally make separate wills (usually referred to as Joint or Mirror Wills), they may wish to discuss the provisions with one another in advance in order to ensure that each will is appropriately drafted. Usually, when a married person dies the major assets will go to the survivor (especially if there are IHT implications) or should they both die together (e.g. in a road accident) the assets will be bequeathed to the same named beneficiaries.

6 CHILD-CENTERED - In the case of second marriages, it may be prudent to think carefully about what would happen if dependent children were left in the care of a step-parent and how this would affect their eventual inheritance. Any natural parents in a second marriage who wish to ensure that at least part of their estate goes to their children (and is not gobbled up by the surviving step-parent) should think about including trust provisions that will ‘ring-fence’  the interests of the children, especially if they are below the age of adult responsibility.

7 DISINHERITING SOMEONE – Sadly, some parents do on occasion decide for certain reasons to disinherit an adult son or daughter. However there are circumstances in which a disinherited offspring might make a claim. In a less extreme case, a parent who simply wishes to delay passing on an inheritance to a younger adult can have the assets held in trust until the beneficiary reaches a set age.

8 FOLLOWING YOUR WISHES – Choose the executor (or executors) of your will carefully. A close relative or trusted friend is an obvious choice, but should be complemented by someone, such as our profssional solicitors, who has no personal interest in the distribution of the estate. The most beneficial arrangement is to have an odd number of executors so that any disagreements regarding an estate do not end in deadlock.

9 DISABILITY DIMENSION – Consider granting power of attorney at the same time as writing a will. Many people make the mistake of assuming that the executors will automatically be granted power of attorney should an accident or illness lead to a serious and permanent mental or physical impairment. A power of attorney document has to be drawn up separately – but this can be done simultaneously with the will.

10 NOT THE END - Unless you are particularly aged or in poor health, do not approach the writing of a will in terms of ‘putting your affairs in order’, as if this means any further action is not required. Draw up a future timetable to regularly review your financial circumstances, as any major changes in these will probably require an alteration in your will.

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Cases of incorrect tax payments pre-date March 2008

David Batty
The Guardian, Monday 6 September 2010

More than 10 million people may be in line for a tax rebate due to errors in the HM Revenue and Customs tax code system.

The Treasury has already announced that 4.3 million people are set to receive a rebate because they have paid too much tax over the past two years. But historic errors may have resulted in a further 5.8 million people overpaying income tax before March 2008.

Tax officials have identified £3bn in overpaid tax from the years before then, in addition to the £1.8bn of overpayments in the past two years, according to the Daily Telegraph. It said the HMRC has 18.2  million “open” cases of incorrect tax payments pre-dating March 2008.

HMRC hopes to repay at least some of that money over the next four years, the paper said. On Saturday, the Treasury said nearly 6 million people in the UK are to be told they have paid the wrong amount of tax in the past two years, with some facing bills of up to £5,000. The further errors identified since then could add a further 7.7 million people to the total number affected.

Around 1.4 million people are due to be told they owe an average of £1,400 because of errors in HMRC’s calculations of the pay as you earn (PAYE) tax system over the past two years. They will have their tax code altered next year to retrieve the money, which on average should be £1,428. The errors were identified by a new computer system that found widespread underpayments by employers through the PAYE system, which total about £2bn.

Employees who moved jobs or accepted company cars or cash benefits from their employer were the most likely to be caught by the system. The 4.3 million people set to receive a rebate because they have paid too much tax in the past two years are expected to receive an average of £418.

The first letters from HM Revenue and Customs (HMRC) are expected to arrive on doormats tomorrow.

It is believed that in some cases individuals may have both underpaid and overpaid, and the amounts could cancel one another out. In some cases, HMRC will consider writing off demands where taxpayers can demonstrate that they provided all the information necessary to calculate their tax correctly.

The problems arose because at the end of each year HMRC manually checked that the amounts deducted in tax and national insurance by employers using the PAYE system match up with the information held on their records. Those checks have now been computerised.

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